Stamp duty has been the subject of much debate for many years and this intensified in 2022, when Dominic Perrottet announced reforms for NSW, which were then passed into legislation.
The premier’s plan was to give first home buyers the option to choose an annual land tax on their home rather than pay stamp duty upfront.
His move was a response to just how prohibitive it had become for young buyers to save tens of thousands of extra dollars in a low interest rate environment, on top of a significant home deposit, simply to be able to enter the market.
There was a mixed response to his new plan, with NSW Labor promising to unwind the legislation if they were to win the March 2023 election.
So, voters could be excused for wondering, what was Labor’s alternative plan?
Well, it was revealed just last week.
Tax stamped out for FHBs
NSW Labor leader Chris Minns launched a policy to scrap stamp duty altogether for first-time buyers purchasing a home worth up to $800,000 and charge a lower rate for those purchasing a home up to $1m.
He claimed this would help more than 46,000 first homebuyers, with about 28,000 paying no stamp duty and nearly 19,000 paying a discounted rate within the first three years of the new reform. Currently, stamp duty on an existing property worth $800,000 is about $31,000.
The Labor scheme would apply to both new and existing homes- but not vacant land- at a cost of $722 million over three years and will not include an annual tax as a replacement for stamp duty.
As it stands under the Liberal Government, from January 16, first homebuyers purchasing a new property worth up to $1.5m or land worth up to $800,000 can elect to pay an annual land tax of $400 plus 0.3 per cent of the property’s land value instead of a one off payment of stamp duty. Home buyers purchasing an existing property are not eligible for the scheme.
How effective will this be?
PropTrack data shows more than half of the properties currently listed for sale in NSW are below $800,000, while 67% are below $1 million, so there would potentially be a lot of buyers that could benefit.
Of course the flipside to that is that there are fewer properties in Sydney that fit the criteria than in the regions and Sydney is where a large percentage of the buyers are targeting homes.
However, both Labor and Liberal policies have been praised as more generous and practical than past schemes by both major parties.
The old price rise chestnut
Whenever a scheme or grant comes along, there are always claims from detractors that it will simply push prices up through added competition, rather than making housing more affordable.
Both Labor and Liberal plans are no different. Free up more people to buy and there will be greater competition in those markets. It stands to reason.
The real key to bettering housing affordability lies in increasing supply, economists and industry figures say.
However, unlike in recent years, prices are currently falling, so schemes like this are not as likely to create further growth booms. Besides, the construction industry is facing significant challenges around costs, staffing and supply, so creating extra housing is not so simple.
Whichever way the election goes, the proposals by both parties suggest that first home buyers should be better off when it comes to stamp duty than they have been in recent memory.